A petty cash account is a small fund held within a business for small purchases when using checks or cards would be impractical. It is kept in a safe deposit box and only one or two people have access. Withdrawals and deposits are recorded in a ledger to prevent theft. The account is usually around $100 USD for small businesses and up to $1,000 USD for larger companies.
A petty cash account is not a type of bank account but rather a fund held within a business. The petty cash amount contains a small amount of cash and is used primarily for purchases when using checks, debit cards, or credit cards would be frivolous. Cash can also be used to make change if there isn’t enough in the register. Only one or two people are assigned to the petty cash account, and any money withdrawn or deposited is recorded in a ledger. Cash is kept in a safe deposit box and is generally stored at the place of business.
Small cash accounts are always used to store a small amount of money. The most common amount is around $100 US dollars (USD) for small businesses that don’t have a lot of expenses. Larger companies can keep up to $1,000 USD, but generally not more than that because higher amounts increase the potential loss if a theft occurs. To store the cash, it is usually locked in a safe deposit box that is kept at the business.
The purpose of a petty cash account is to have a small pool of money for when small purchases are needed. The account comes into play when a purchase is so small that it isn’t worth going through the formal channels necessary to get a check cut or to get permission to use a company credit or debit card. A change can also be made from the petty cash account when there is not enough cash in the register, and if no one is available to get money from the bank, the petty cash can temporarily replenish the register.
Every time money is withdrawn or deposited into the cash account, someone lowers the amount. For example, if $5 USD is withdrawn, even if there is any change left for any purchase, the $5 USD is marked as a withdrawal. This ensures that theft does not occur and also ensures that the managers know exactly how much money is in the account. When the change is returned, it is also noted.
Few people within a company have access to the petty cash account. There will most likely be one or two people in charge of the account. If it’s an individual, he or she will be in charge of withdrawing cash from the account and replenishing the account, along with reducing any withdrawals or deposits. If there are two people, both people have control of money and bookkeeping or one person is assigned to money and one person to bookkeeping.
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